2020 saw unprecedented disruption for retailers and retailer investors. A total of $4.26 billion in retail assets were transacted in Australia last year, which was down 39 percent year on year – the lowest levels for retail investment since 2011.
Despite the drop, specific sub-sectors of retail investment remained strong and unaffected.
Neighbourhood retail precincts and large format shopping centres were preferred by investors in 2020 represented over 50% of all asset acquisitions. This is likely due to an altering shift within the community with an enhance emphasis on living locally.
Furthermore, neighbourhood retail centres have traditionally offered stable revenue. During these times of economic uncertainty, neighbourhood centres with a strong reliance on non-discretionary consumer spending are proving to be a highly desirable investment profile. Much of the growth has come from CBD precincts and larger-scale shopping centres.
Despite the accelerated growth of online shopping, bricks and mortar premises remain an integral part of the retail landscape in Australia. The dramatic shake-up in the industry has been tumultuous, and there is no denying that; however, opportunities are aplenty with critical evaluation and astuteness.
For investors, this means a sharpened focus on optimising the tenancy mix. The growing trend in the retail sector is seeing an increase in shopping precincts and plazas becoming more service and activity-based to fulfil the local community's requirements. This gap in the market cannot be filled by eCommerce and ensures a stable future for these types of investments.
Shopping Centres, Plazas & RetailPrecincts have the potential to be phenomenal assets to invest in if you understand the fundamentals and you can find the right property in an ideal location.
Investing in large retail properties requires a thorough strategy. Some key considerations include knowing the neighbourhood.Equally, you will need to understand the existing businesses that are occupying the properties – if investing in an established asset - and certainly the underlying asset itself.
It is essential to recognise the types of investments available and understand acutely the changing trends that are affecting and will continue to impact the evolving retail sector.
Top Reasons to Invest in Commercial Plazas, Retail Precincts & Shopping Centres:
1. The demand for non-discretionary retail remains strong
In the supermarket sector as an example, Woolworths reported a 10 per cent increase in food sales in 2020 due largely toCOVID-19 panic buying. In 13 weeks (ending April 5) Woolworths had $11.1billion in food sales – up 10.3 per cent from comparative sales in 2019.
Rival Coles faired even better, with their sales up 13.1 per cent in third-quarter revenue. Furthermore, department storeBig W, also reported a 9.9 per cent boost in their sales.
These figures are clear signs that certain segments of retail will remain strong even in the current environment, which has severely impacted many other businesses in the broader retail sector.
2. Shopping plazas, malls and retail precincts will remain an important aspect of the Australian culture.
Retail precincts and larger-scale retail complexes have always offered the customer convenience by providing a one-stop-shop to make needed purchases from multiple shops in the same location.
Many cities, towns, and suburbs in Australia have fast-growing populations, and the urban sprawl is continuing at an accelerated rate. This is creating fantastic investment opportunities to acquire parcels of land or buildings, which will generate steady, high yields and tremendous capital gains into the future, leveraging Australia's booming property market.
3. Reduced risk
Investment is equally about identifying opportunities and mitigating risk. Shopping malls, plaza and retail precincts help minimise risk by spreading the risk.
In contrast, investing in one retail outlet is akin to putting your eggs in one basket. If that store is successful, you will be good; however, your investment would suffer if it failed.
With a shopping mall, plaza or retail precinct, if one shop goes out of business, it will not significantly impact your investment. The other stores within the complex would lessen the effect.
Why Choose QICG
QICG has a wealth of experience guiding investment in large scale commercial plazas and retail precincts. Our expertise has helped many investors find ideal properties that maximise cash flow and capital gains.
Call our friendly team today if you would like to explore the opportunity to strengthen your portfolio with a safe and proven investment in a new or existing commercial plaza, mall or retail precinct.
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